Although the concept is not new, challenges to “dark patterns” are rising all over the country. The Federal Trade Commission, Consumer Financial Protection Bureau, state attorneys general, and class action plaintiffs increasingly cite this phrase in such complaints as deceptively enrolling consumers
The laws and regulations surrounding subscription-based offers continue to change on a regular basis. Federal and state regulators and private plaintiffs continue to lodge challenges against companies selling products and services on a recurring basis. Moreover, new cases and law enforcement activity offer evolving interpretations on how to comply. Given the substantial developments, companies offering products or services on an automatically renewing basis should take heed.
The primary federal regulator of autorenewal programs, the Federal Trade Commission (FTC), remains as active as ever in enforcing the Restore Online Shoppers’ Confidence Act (ROSCA), the federal statute governing online negative option programs. The FTC has filed multiple new lawsuits against companies selling products and services on a negative option basis and continues to litigate cases that it has filed.
The district attorneys in the California Automatic Renewal Task Force have also continued to bring actions at a furious pace, demonstrating their clear intention to pick up where the FTC has left off. In fact, the task force recently filed a lawsuit in California state court against Match.com, even though the FTC had already filed a lawsuit against the company. The California district attorneys also announced settlements with Classmates.com, Home Chef, CheckPeople.com, and Care.com, among other companies, and the consent decrees have imposed increasingly stringent requirements on the settling businesses.
Although the coronavirus pandemic has impacted every business over the past few weeks, companies offering negative option and subscription programs face a unique set of issues. On the one hand, the subscription model offers consumers benefits that are difficult to provide outside of this context (such as streaming services, online learning programs, and uninterrupted access). On the other hand, business interruptions — in addition to consumers tightening their budgets — have presented significant hurdles to the subscription model during the current pandemic.
For example, the current shutdown has prevented many companies that offer membership programs from continuing to provide these services to consumers, such as gyms, access passes, and in-person events. As a result, customers have increasingly begun to cancel their memberships to avoid paying for services that companies simply cannot fulfill. Online services are not immune to the fallout, as consumers who are tightening their belts and looking for ways to reduce spending have started cancelling recurring billing services, which they may view as unnecessary in the present circumstances.
Continue Reading Automatic Renewal Programs: Reducing Risks During the COVID-19 Pandemic
With the arrival of 2020, many people have begun their New Year’s resolutions to get healthier and lose weight. Is “diet” soda the secret to weight loss success? Not according to the Ninth Circuit, which held last week that it is not reasonable to believe that drinking “diet” soda will help in efforts to lose weight and affirmed dismissal of a false advertising lawsuit.
In the case, Becerra v. Dr. Pepper/Seven-Up, the plaintiff alleged that the word “diet” in Diet Dr Pepper’s brand name violated various California laws, including the state’s False Advertising Law, because it falsely promised that the product would assist in weight loss or healthy weight management. The plaintiff alleged that this was false because an ingredient in the diet soda, aspartame, causes weight gain.
The district court granted defendant’s motion to dismiss without any discovery. In granting the defendant’s motion to dismiss, the district court held that no reasonable consumer would believe that the word “diet” in a soft drink’s brand name promises weight loss or healthy weight management. And, the district court held, even if a reasonable consumer would believe that, the plaintiff had not sufficiently alleged that any such promise was false or that aspartame consumption causes weight gain.
Continue Reading Ninth Circuit Holds that “Diet” Soda Name Is Not False or Misleading
Subscription merchants that take payment by Visa cards will have new acceptance, disclosure, and cancellation requirements imposed on their transactions beginning April 18, 2020. As Visa recently announced, the card brand is updating its rules for merchants that offer free trials or introductory offers as part of an ongoing subscription program.
The Visa rules follow on the heels of similar Mastercard rules that became effective earlier this year. However, while MasterCard’s rules focus on merchants selling subscriptions for physical goods, Visa’s rules apply to merchants selling either physical or digital products if the merchant offers a free trial or introductory offer that rolls into an ongoing subscription arrangement.
The new requirements are more specific than what the Restore Online Shoppers’ Confidence Act (ROSCA) prescribes, and while they don’t have the force of law, noncompliance could put a merchant’s credit card processing capabilities at risk. Here are some of the components of the new Visa rules:
Continue Reading New Requirements for Subscription Merchants Accepting Visa Cards
Over the past few years, class action plaintiffs have filed a slew of lawsuits against online retailers under the New Jersey Truth in Consumer Contract, Warranty and Notice Act (TCCWNA), which prohibits a seller from offering or entering into consumer contracts that contain any term that violates a “clearly established” New Jersey or federal law. Violations are punishable by a maximum civil penalty of $100, actual damages, or both, and private actions can be brought by “aggrieved consumers” (more on that later).
TCCWNA has been around for years, but class action plaintiffs started using the statute to sue online retailers based solely upon their website terms and conditions without suffering any other injury. From what many retailers can tell, the plaintiffs did this by searching for and then challenging indemnification clauses, limitations of liability, and disclaimers of warranties in website terms of use and terms of sale, merely for the purpose of filing lawsuits.
The Supreme Court will decide whether a defendant can “pick off” the named plaintiff in a Telephone Consumer Protection Act (TCPA) class action – and moot the putative class claims – by making a Rule 68 offer of judgment before the putative class representative files a motion for class certification. Thus, the Supreme Court could streamline putative class actions by eliminating the need for plaintiffs to file “protective” motions for class certification at the same time they file their complaints. The case, Gomez v. Campbell-Ewald Co., also involves important vicarious liability issues that litigants routinely address in TCPA class actions.
In Gomez v. Campbell-Ewald Co., the defendant marketing consultant allegedly arranged to send the plaintiff unsolicited text messages in violation of the TCPA through a third-party caller called Mindmatics, purporting to recruit for the U.S. Navy. Before the plaintiff filed a motion for class certification, Campbell-Ewald offered to pay the plaintiff $1,503.00 per violation, in full satisfaction of the plaintiff’s claims. The plaintiff allowed the offer to lapse and sought class certification. Campbell-Ewald argued to the United States District Court for the Central District of California and then to the Ninth Circuit that its Rule 68 offer of judgment mooted the plaintiff’s individual and putative class claims. The Ninth Circuit disagreed with the defendant, aligning the decision with other circuits which have also held that a rejected Rule 68 offer does not moot claims if the offer is made prior to filing or, or ruling on, a motion for class certification. The Seventh Circuit, in contrast, held in Damasco v. Clearwire Corp. that a Rule 68 offer made before the plaintiff had filed a motion for class certification mooted the class claims.
Continue Reading TCPA “Pick Off” Play – Supreme Court to Consider whether a Settlement Offer to Named Plaintiff Moots Class Action
Last week, Senators Al Franken (D-Minn) and Hank Johnson (D-Ga) revived the Arbitration Fairness Act (“Act”), which would ban arbitration provisions in consumer contracts, as well as employment, antitrust, and civil rights cases, and only allow the parties to agree to arbitration after the dispute arises. The newfound interest in the Act demonstrates renewed opposition to arbitration as an alternative to litigation.
If passed, the Act would have a clear impact on marketers’ ability to avoid class actions and limit their liability in contracts with consumers. Online marketers often implement binding arbitration provisions to reduce their exposure to class action lawsuits brought by consumers. But the proposed Act would ban those provisions and only allow the parties to agree to arbitration after the dispute arises.
Continue Reading Arbitrate-Shun: Congress’s Proposed Attack on Arbitration Clauses
In Reliable Money Order, Inc. v. McKnight Sales Co., Inc., decided last week, the Seventh Circuit declined to overturn class certification of a Telephone Consumer Protection Act junk fax suit, despite class counsel obtaining discovery from a third party in one case and using it to spawn a series of other TCPA cases. The
Last week a California appeals court invalidated a car dealer’s mandatory arbitration and class waiver clause, holding the sales contract’s arbitration clause unconscionable and therefore unenforceable to defeat a putative class action. In Natalini v. Import Motors, Inc. , plaintiff sued under state consumer protection statutes alleging that a car and its tires that he